Is Obama Pulling The Plug On Health Reform’s Long-Term Care Program?

The actuary in charge of the Affordable Care Act’s Community Living Assistance Services and Supports (CLASS) program has “sent an email to colleagues Thursday informing them that HHS is closing down his office on Friday,” The Hill’s Julian Pecquet reports. The news, which the administration is publicly denying, comes after a Republican investigation revealed that economists had warned HHS about the program’s insolvency.

If true, the demise of CLASS represents a substantial setback for the nation’s long-term care structure. Americans spend more than $200 billion a year on long term care services in nursing homes, at home, or in assisted living facilities. With limited private insurance options, “Medicaid is now the largest single provider of long-term care costs — it spent more than $100 billion last year, over one-third of its budget” and “paid more than 40 percent of the nation’s total long-term care bill.” By mid-century, the Congressional Budget Office predicts that Medicaid will use 16 percent of anticipated federal revenues to fund care for the baby-boom generation.

Impairment is generally very hard to anticipate or save for (about four in 10 people who need long-term care are actually under the age of 65), and families rarely purchase coverage or falsely assume that Medicare will cover their needs. Add to that the fact that the private long-term care market is highly unstable and expensive and as a result individuals often spend down to “$2,000 in financial assets” to qualify for Medicaid coverage.

CLASS, originally championed by Ted Kennedy, sought to fix the system by establishing a national insurance program financed by voluntary payroll deductions. The benefit was to be meaningful but limited — an average of at least $50 per day that recipients could use to pay for home-based or institutional service without becoming impoverished. But from the very beginning, economists worried that the program would have a hard time attracting healthier applicants and eventually pay out more in claims that it would collect in premiums. Secretary of Health and Human Services Kathleen Sebelius had responded to the criticism by reassuring Congress that “the program will not start unless we can absolutely be certain that it will be solvent and self-sustaining into the future” — a promise that, if this latest development is true, she is intent on keeping.

Update:

The administration admits is reducing staff at the CLASS office: “While the staff of the CLASS office has been reduced, reports that the CLASS office is closing are not accurate. We are continuing our analysis of this program. As we have said in the past, it is an open question whether the program will be implemented. A CLASS program will only be implemented if it is fiscally solvent, self-sustaining, and consistent with the statute.”